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tv   HHS Secretary Azar on Health Care Policy  CSPAN  December 10, 2018 8:29am-9:00am EST

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of the u.s. government accountability office. alyza sebenius covers cybersecurity and the white house for bloomberg news. the weapons systems cybersecurity report is available on the gao website. this is "the communicators" on c-span.
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>> now health and human services secretary alex these are talks about the trump administration's healthcare policy including its goal of reducing costs and improving choice. he spoke earlier this week at the american enterprise institute. [inaudible conversations] good afternoon. i think we're ready to get started again. thank you all for being here. x of those watching on the live stream and to all who watch the video after the event. i michael strain, director of economic policy studies at aei and is a pleasure to be with you
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for important discussion of the policy barriers to real choice and competition of the healthcare system and promising opportunities to overcome those barriers. i am pleased and honored that alex azar, sector of health and human services is with us today. i will introduce the secretary in the moment. before i do brief reminder of the rohit chopra the sector will speak from this podium for 15 or 20 minutes after which he and my colleague tom miller will have a conversation on that stage. following the discussion will open it up to some questions from you. alex azar was sworn in as president trump secretary health and human services in january 2018. his current tenure at hs is a second tour of duty at the department. after serving as general counsel and then deputy secretary in the 2000s. he spent his career working in senior healthcare leadership roles in both the public and private sectors. secretary azar as a friend of aei prick he spoke here just a
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few months ago on the administration's agenda for prescription drug pricing. several of my former they colls are now his colleagues in the trump administration's including fda commissioner scott gottlieb. it's a pleasure to welcome him back to afi and to register the 24th sector health and human services, alex azar. [applause] >> thank you very much michael and good afternoon, everyone. i want to begin i noting of course our national morning for the passing of president bush. we should all remember his light unexceptional and devoted service to our country, especially during these days. i'm grateful to aei for putting together today's event which is such an impressive gathering of thinkers on an important topic. i have to say, in my current job, i can always feel a little out of place when entering the hallowed halls of right-leaning think tanks. it's not an easy job.
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you have to come in and explain how you're bringing the principles of limited government and fiscal conservatism to a $1.3 trillion agency. hhs, by itself, is larger than the governments of almost every country on earth, save china, germany, japan and france. i should say, this is one competition where i'm content to lose to the french. but it is appropriate to be here at aei because, throughout its history, this institution has been devoted to thinking about how to apply free-market principles to the practical work of governing. aei scholars think not just about limiting the harms of government intervention, but also how government can be reformed to deliver better results. aei's president, arthur brooks, put it pithily when he once suggested that it could be worthwhile for conservatives to think about, quote, declaring peace on the safety net. i certainly hope that's how you all at aei think about it. i run the safety net. and it's hhs, not the pentagon,
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what would we fight back with, our actuaries and calculators? of course, he's not suggesting we should be content with the safety net we have. many of you already know better, but complacency isn't really arthur brooks's thing, and it's not my kind of thing, either. we need to think about how to reform the safety net and all federal healthcare programs, so that they actually work for the people they serve. but we also need to have an even more ambitious vision than that: we as conservatives want a better-run safety net, but we also want better healthcare for all americans. the goal here is clear: we all want affordable, quality healthcare for every american. delivering that requires a vision both more comprehensive and more ambitious than previous efforts at healthcare reform. affordable healthcare demands thinking about every element of healthcare: not just health insurance, but healthcare services, our health workforce, and particular elements of care like prescription drugs.
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the release of yesterday's choice and competition report reflects the broad scope of reforms that may be necessary. but looking across the healthcare system, we can deliver reform that actually works: not trying to make insurance more affordable while neglecting the cost of underlying care, or trying to bring down the cost of care without providing the right financial incentives to accomplish that. healthcare reform should rely, to the extent possible, on competition within the private sector. as brian mentioned this morning, the private sector is the source of the innovation that's the only way, in any part of our economy, to drive down costs while improving quality. patients should be at the center, free to make choices that work for them. where possible, we should defer to states to innovate, rather than assuming the federal government knows best. finally, we need to deliver care in an affordable, fiscally sustainable way, while
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maintaining a safety net for the needy. these ideas are a radical departure from the way american healthcare has worked for so long. for the past half century, the government has been the dominant factor in both the financing and delivery of our healthcare. as many of you know, in fact, even as we pride ourselves on having a more private-sector driven system than other nations, america's government healthcare spending, per capita, is still higher than almost any other government's on earth. this is partly because patients have been removed from decision-making, insulated by third-party payment systems from any incentives that could drive down the cost of care. these third-party payment systems, especially government programs, pay for procedures, rather than seeking out value. this has led us to the system we have today, where each year we spend a staggering $28,000 per family on healthcare, and yet many americans still don't have access to the care they need.
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unfortunately, the most recent attempt to reform american healthcare, the affordable care act, did not directly attack these flaws. rather, it expanded and reinforced the system we have today: it put new regulations on health insurance, provided generous new subsidies, and dramatically expanded the federal government's role in medicaid. the main thrust of the aca was to push $1.6 trillion over the next decade in new spending and subsidies into the status quo, reinforcing what already doesn't work. the rest of our system remained in stasis: twenty-eight million americans are still uninsured, and the out-of-pocket costs they pay are higher than ever. the more than 200 million americans who receive health insurance through their employer or medicare are still paying too much for the underlying care. even the americans who do have insurance through the aca haven't really seen their problem solved: their insurance costs are high partly because the aca destabilized insurance markets, but also because healthcare services are so
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expensive in the first place. addressing this situation will involve substantial reforms to insurance regulations. earlier today, brian ran through the details about our expansion of short-term insurance and association health plans, and the proposal to expand health reimbursement accounts. our healthcare vision requires delivering these kinds of new options, because consumers have to be able to finance their healthcare in ways that work for them. but as we go about reforming insurance, we have to do it in a way that will support the development of competition and choice in healthcare services, too. i'll give you one example of what this looks like. last week, cms laid out some new ideas for states to pursue, publishing models for state relief and empowerment waivers under section 1332 of the aca. under these waivers, states have some flexibility to modify the structure of the current premium tax credit system, to determine what kinds of plans are eligible
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for tax credits, and to undertake innovative efforts to protect especially high-cost consumers. but perhaps the most interesting possibility within the 1332 models is the model we proposed around using aca tax credits to fund new, consumer-driven savings accounts that can pay for premiums or out-of-pocket costs. this is how you get beyond the traditional model of insurance and bring real competition to healthcare: by protecting americans from the risk of catastrophic healthcare costs without insulating them from being price-conscious consumers. the solution here comes from the private sector, where many employers have paired their lower-cost, high-deductible plans with health savings accounts. these plans work best when the hsa is funded: you're still insulated from the risk of paying large health costs out-of-pocket, but you're in charge of the dollars that you spend to pay those costs. now, it happens that employers, just like the government, have run into the limits of what you can get just from tweaking
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healthcare financing. an article just this week in the wall street journal reported that employers are finding limitations to the use of hsas and high deductibles: these tools can help restrain unnecessary spending, but new financial incentives alone won't build a market where patients are truly in charge and healthcare is competitive like any other sector of the economy. in fact, according to the health care cost institute, from 2012 to 2016, americans' utilization of healthcare services stayed flat, healthcare spending only rose because prices rose. this is a system that needs fundamental reforms, not just tweaks to financing. to drive down prices, we need to think about how to drive more competition. unfortunately, the single biggest healthcare spender is medicare, which pays set prices for procedures rather than seeking out value and driving competition. remarkably, some have proposed reforming our health system through using government-driven
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coverage to insure all americans, expanding government's footprint, further sidelining consumers and the private sector. this repeats the mistakes of the affordable care act, by simply assuming more financing means better healthcare. right now, the way we finance a lot of healthcare actually impedes competition, rather than promotes it. for instance, there is a huge differential between what medicare pays for services at hospital-owned facilities versus outpatient centers. this has driven hospitals to snap up their smaller competitors, who can't say no to the possibility of a new owner that will automatically increase the compensation they get from the government. fixing this perverse situation has been talked about for years, by administrations of both parties, and yet this administration is the one finally bold enough to do it. just the limited proposals we have put forth already on site-neutral payments are estimated to save $380 million next year alone, while restoring
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a more level playing field for providers. we have federal regulations that impede competition, too. smaller healthcare providers will never be able to compete with larger ones unless they can band together to deliver comprehensive sets of services. but today, current interpretations of laws like the stark law and the anti-kickback statute can make this almost impossible to do, which is why we are in the middle of an unprecedented effort to consider and reform the way these laws affect care coordination. i want to be clear that nothing that we do on these rules will weaken fraud protections, the only goal here is to avoid situations where providers are racking up burdensome legal fees to do their jobs, or have to end up in co-ownership arrangements just to coordinate care. states can also play a major role. as this week's choice and competition report lays out, states impose a thicket of regulations that drive up the cost of providing care. these include
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certificate-of-need laws, scope-of-practice rules, and the like. state governments can and should have a robust debate about what appropriate regulations look like, but personally, i find it hard to fathom how any healthcare consumer needs protection from a nurse practitioner writing a prescription or a new mri facility opening up down the street. as we move toward paying for value, we believe the need for micromanaging providers, at both the federal and state level, will be dramatically diminished. if a provider is willing to accept risk for the outcomes they deliver, then we don't need to micromanage how they do it. the system works when the provider is incentivized to deliver the outcomes that matter to the patient, not the paperwork that matters to the government. the final area for reform i want to address today is our country's broken system of prescription drug pricing, where the results of our third-party payment system are as perverse as anywhere. one fundamental principle of economics and markets is supposed to be that, if you cut your price, more people will buy your product.
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you don't need to be kevin hassett or michael strain to know that. and yet that is not, by and large, how drug prices work in america. if a company lowers its price for a given drug, the drug can actually become less desirable vis-à-vis its competition. obviously, consumers wouldn't look at it that way, but they don't decide which drugs are available and at what cost, that is decided by insurers, employers and pharmacy benefit managers. all of them are paid as a percentage of a drug's list price. if a drug's price drops, many patients will save, but those actually negotiating for the patients make less money. here, we have another example of how the way we finance care is driving up the cost of care itself: the only way we ended up with the huge gap between drug'' list prices and the net prices negotiated is because there is a third party in between the consumer and the product, just as there is in so much of healthcare.
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ideally, the patient should be at the center of this system. but in many parts of healthcare, we do need to support patients to work with navigators to make the right decisionsand in those cases, like drug pricing, we need decision-makers who aren't driven by different, opposite incentives. resetting this whole system and rewriting the rules of the road, so that drugs actually compete on price, is necessary to building a drug pricing system that meets the principles i've laid out. now, some parts of our drug pricing system do work well, because incentives are largely aligned and consumers are in charge. that includes medicare part d, which was built around the principles i've laid out today. it harnessed the private sector and empowered consumers. because it followed these principles, it has actually been much more fiscally sustainable than expected. but there are still opportunities for improvement. we recently proposed new flexibilities for plans to negotiate over drugs within what are known as the protected classes, six particular types of drugs where access is especially important.
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when part d was created, we put in place rules, intended to be temporary, that essentially require plans to cover all drugs in these classes. this undermined the plans' ability to negotiate for lower prices, especially as more drugs in these classes entered the market and private sector plans developed new tools for pitting them against each other. right now, part d gets an average discount of just 6% on these drugs, while the private sector gets discounts of 20 to 30%. drug companies are using these protected classes to take advantage of our seniors. what we've proposed is to allow part d plans to use the same innovations that are already in use by the private sector. these tools harness competition among prescription drugs, because even branded drugs, still under patent, often have therapeutic competitors. it's worth noting how our proposal for the protected classes differs from other
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proposals in the same area. in 2014, the previous administration proposed outright elimination of two of the protected classes. this approach underrated the importance of bringing private-sector negotiation tools to all of the protected classes, and it disregarded the fact that part d, because it's a consumer-driven program, has built-in protections. part d enrollees retain the ultimate consumer protection, exit rights. in a healthy market like part d, to modify a phrase, if you don't like your plan, you don't have to keep it. we don't need to limit private-sector innovation with overly burdensome regulations when patients can simply pick another plan with their own dollars. that same philosophy can be applied to so many other inputs of our healthcare system. this week's historic choice and competition report that the administration released shows how ambitiously we're willing to think.
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we'll look at every possible factor, from insurance to workforce, that could be driving up healthcare costs. we'll examine every possible regulation that might be driving up the prices consumers pay. one of the beliefs that separates our efforts from past reforms is our recognition that affordable healthcare for every american does mean affordable insurance premiums, but most of all, it means affordable healthcare prices. under this administration, healthcare reform will be focused on driving down the cost of care, not just coming up with a better way to finance it. president trump isn't interested in tinkering around the edges of our system. he knows the burdens our system imposes on americans today, he wants fundamental reform, and that's what we're going to deliver. thank you very much for your time today. i'm looking forward to our discussion. thanks. [applause] >> thank you very much, mr. secretary. you've answered most of my questions. at aei was a we will have a
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fireside -- we don't do it figuratively. >> security. [laughing] >> there we go. that's a new one. >> scott gottlieb tells me it's not flavored and it is smokeless and they can probably stay on the market. this will cause some problems in the iowa caucus if it doesn't light up. he refill. you got the idea. >> it's going. >> very distinct. you're very fond of former president ronald reagan. there are no easy answers but there are simple once. he also sit on one more than one occasion most notably in his 1981 inaugural address in this present crisis government is not the solution, to the problem, government is the problem. how much so in healthcare?
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we have a lot of problems in front of you and just stand back sounds like that's not exactly the solution either. >> tom, i often for one of the important life lessons or ideological lessons i pick up audit of all places at yale law school. i had a property professors were not so much i actually signed and took land use controls. i mean, i never went to law school think it learned about zoning. but the professor used to always say as you're taking metro-north down to manhattan from new haven and juicy sections of manhattan that just have outbuildings sitting there and land that is not being put to its highest and best use even as a parking lot, ask yourself the question. how is the government involved? it's a really useful framework. when you see things that are not operating the way that there's a classical economist you might think they should work more efficient markets are competition, ask yourself does the government have its hand
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here? health care, as you make income it is medicare, you know, we had a system in 1965 we started paying reasonable cost reimbursement. you got more cost. guess what happens, prices go up. give me a bill, i pay it. in the '80s president reagan came in and started moving to a perspective view schedule based on that system. inflation-adjusted with all kinds of complex one knows but still paying for procedures, paying for sickness and being completely indifferent to outco. so we're trying, we are changing the and that's what got us on the journey. >> we talk about site neutral. can we really be totally neutral when government is paying for healthcare? you either paying better or pain worse. >> site neutrality we will drive towards that. it's a challenge. >> this is a value side. >> it really is. this is why i favor mechanisms of private-sector competition. because of really don't think
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myself sitting around a conference table with my colleagues is the way to determine pricing. or to use market actors to compete. that's what i referenced in my speech part d. that's what medical bandage his own genius. here's an amount of money, build a structure and the patient can choose to pick your a plan or somebody else's. a tremendous success of delivering satisfaction and value both. the more we can use those approaches to determine rates and moves to value, that's the way got to be doing. >> there are a lot of observations and cemetery criticisms of what other governments as those of actors were doing in this report on cost and competition. what's the balance in being able to inform and incentivize but not necessarily so once again in washington we know best? >> it's a challenge in particular in the part of a
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program called fee-for-service. with medicare fee-for-service that is as running a government program. a crowd like this come where to call that out. we running a government insurance system and the rate system is being sent around my conference table. that's why the extent to which we can look to medicare advantage and part d as examples of how things and it should work, the better, will have an interesting discussion in the next five to ten years because medicare advantage has always been a small portion of medicare and medicare fee-for-service has dominated. that's changing now. up to think a third of our beneficiaries are not in medicare advantage. if he keeps going at this rate with seniors who age and are used to having a comprehensive benefit like medicare advantage rather than is very different 19 \60{l1}s{l0}\'60{l1}s{l0} fee-for-service benefit and that she is that kind of plan, there's a day when will have majority medicare advantage
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where it will be the dominant part of the medicare system. we will have to rethink them this whole metal frame we have. fee-for-service innovates and medical advantage follows. maybe we need to start thinking medicare advantage innovates and fee-for-service policy that innovation. >> we have no shortage of rhetoric and efforts on information and transparency. i remember a dozen years ago, a republican conference, we can do this all steps instructive. it really hasn't ignited and taken off. is it a the problem as you see, supply and demand or maybe not asking the right questions are providing it in a manner that he step think it's people interested in say i i can use unable to something with it? >> so there's a bit of supply issue and we are working very hard to advance that. through cnas were voting more and more information out there we have provider reimbursements are now available. the rates that hospitals and
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doctors are getting is part of the disclosure that's required that is the internet required. we are continue to work on ways to bring more transparency to the pharmaceutical pricing. the challenge becomes on the demand side. do you care if your first dollar coverage if you have set $25 co-pay regardless of where you're buying the service, do you care? the answer is no. that's why we got to think more fundamentally about how we access healthcare and how that can reinforce and send it towards a value driven system as i mentioned in my remarks. >> you talked about building markets. maybe i watch too much hdtv. visit every decoration? is it a renovation is it a real tear down and demolition and site preparation? different places and different amounts but you got a lot in front of you. what actually goes to building that getting people to read about everything being done at once?
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>> it is a very significant issue. listen, we always like to talk about us have in the united states a very free market system and yes, there are major elements that are quite free that doesn't take them competitive in any economic sense of the word in terms of we do not have a competitive market performance suitable in the sense that you do not have pricing mechanism that as a sit in my remarks, that he could decrease price you get more products sold. you have some real distortions in the system, largely driven by government behavior. that's what i am as limited government and advocate as anyone can be. i hope that comes through. but when the government has set the rules come when a system is oriented around a set of rules it does take the government to change those rules of the road to help facilitate a competitive marketplace. that may seem big government. it may seem disrupted and it deceptive because you very trusting, or significant financial interest who are not at all please with the
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disruption that the president and i are attempting to bring to the healthcare system. we are never going to get anywhere if we don't. i just found remarkable people are so vested in the status quo that they do not stop complaining about. they are not willing to help the part of change it. >> we have a tight schedule. we can take a couple of questions from the audience. if you can identify yourself. >> thank you so much, secretary azar. i'm rosemary gibson. i started my career at aei a long time ago and just wrote a book on our dependence on china from medicine, particularly generics. i would love to talk about competition in the generic market. it's driving a lot of manufacturing to china, fitting right into its initiative to become a global pharmacy to the world what it means is a lot of men and women in the south china sea on those naval vessels are dependent on the adversary for their antibiotics and blood
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pressure medicine spirit we know there been some quality issues recently. who is in charge of this? is a beyond the fda? beyond barda, defense department has a stake in is because it is sacred he would have to depend on the adversary for essential medicines. what's the locus in government to consider may be some of our medicines at strategic assets? is anybody thinking about this? is a somewhat in office to follow up with? incented store the issue that hasn't got much attention. >> we do consider these issues, and we serving to look at medicine supplies essie strategic and national security security elements of those. so that largely driven by our assistance to get it for burtis and response and coronation with the fda, both on the supply chain as well as the actual supply products we do look at that. but in terms of generic market, the generic market is actually
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one of the more competitive, almost hypercompetitive aspects of our system that has led to some supply dislocation. because what we found is you get that immediate competition and a decline in price consent you have maybe 14-15 generic competitors through the channel, retail channel sort out but over time to find if the costs of production and the reimbursement levels that they can't all survive the 14, 15 of them can't survive to produce and make among others, and you get a sorting out over the years and you get to a later point where it starts creeping up we have made only one or two suppliers remaining, and that's an issue with asked about in our blueprint is, i actually under compensating generics and leading to either where generics get made or just do an adequate level of entering competition. summit of the pricing issues that it become quite famous are
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not branded pharmacy. they are generic products where there's been this supply dislocation either because the reimbursements have sorted out to leave only one markedly remaining, or we at at the i been doing of inspecting and withholding manufacture off-line because of not able to meet our quality standards. .. . >> guest: why not let them buy into it? >> see, the challenge with this notion of


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